How Fast Will The Economy Come Back?

We received good employment news for last month. Even McDonalds is hiring with plans to add 50,000 employees in one day. The signs of recovery are here. The next question most everyone is asking is: How Fast? That is a good question. When we “emerged” from the recession, and “emerged” might be a strong word for what happened, most all analysts advised that we were in for a recovery of stops and starts. Many were fearful of a double-dip recession. These predictions were right on target. The recovery was so painfully slow that most did not ever recognize that the economy was growing. Fears of double dip recession fade as the jobs machine heats up. So, will the recovery pick up momentum or will there be more stops and starts?

Here is our answer: If the economic obstacles we have lived with for the past six months do not derail the recovery, then the recovery is not likely to be derailed. These obstacles have included the end of government stimulus, rising oil prices and an extraordinary natural disaster. One more month of solid employment gains would help convince many that the recovery is still on track. Let us add some measure of perspective here. In mid 2009 we were losing over 500,000 jobs per month. Last year we gained approximately two million jobs, but many of these were due to government stimulus and especially the census. Now we are adding well over 200,000 private sector jobs per month. Mind you, 200,000 private sector jobs per month are not enough to replace the millions of jobs we have lost due to the recession. However, we are certainly moving in the right direction. In other words, 200,000 jobs does not mean that the recovery is exploding, but it is not stopping and starting either. The numbers we see for growth in the first quarter and the April jobs report should tell an important story in this regard. If these numbers are positive, we would not be surprised to see rates continue to rise from their historic lows. Unless we have another one of those “intervening” variables such as a government shutdown. Never a dull moment when there are politicians involved.

Many believe that job creation will not slow down.  Witness this story from CNN/Money published today:

The economy may be losing steam, but that won’t stop companies from hiring. Businesses have added more than a half-million jobs this year, the best three-month gain in private-sector employment in five years. And that momentum should continue. A year ago, a false start in business hiring came to a sudden end when the economy started to slow. But experts believe the nascent hiring boom has a better chance of weathering the economic headwinds this time around. “It looks like that expansion phase probably has some legs this time,” said Madeline Schnapp, director of macroeconomic research for TrimTabs Investment Research. Businesses have wrung everything they can out of their workers during the past year. Once productivity reaches a peak, companies have to start hiring again. So even as economists are cutting their economic growth forecasts across the board, businesses are signaling they still plan on hiring.

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